Fund Description: The ProShares UltraShort Russell 2000 is an exchange-traded index fund that is a separate investment portfolio of the ProShares Trust, an exchange-traded fund that consists of separate investment portfolios (each, an index Fund). <p> INVESTMENT OBJECTIVE: The ProShares UltraShort Russell 2000 seeks daily investment results, before fees and expenses, that correspond to twice (200%) the inverse (opposite) of the daily performance of the Russell 2000 Index. If the Fund is successful in meeting its objective, its value (before fees and expenses) should gain approximately twice as much, on a percentage basis, as any decrease in the Index when the Index declines on a given day. Conversely, its value (before fees and expenses) should lose approximately twice as much, on a percentage basis, as any increase in the Index when the Index rises on a given day. The Fund seeks investment results for a single day only, not for longer periods. This means that the return of the Fund for a period longer than a single trading day will be the result of each day’s returns compounded over the period, which will very likely differ from the inverse of the return of the Index for that period. <p> INDEX DESCRIPTION: The Russell 2000 Index is a measure of small-cap U.S. stock market performance. It is a float adjusted market capitalization weighted index containing approximately 2000 of the smallest companies in the Russell 3000 Index or approximately 8% of the total market capitalization of the Russell 3000 Index, which in turn represents approximately 98% of the investable U.S. equity market. All U.S. companies listed on the NYSE, AMEX or NASDAQ meeting an initial minimum ($1) price are considered for inclusion. Reconstitution occurs annually. Securities are not replaced if they leave the index, however, new issue securities meeting other membership requirements may be added on a quarterly basis. As of September 30, 2006, the Russell 2000 Index included companies with capitalizations between $73.6 million and $3.0 billion. The average capitalization of the companies comprising the Index was approximately $768.3 million. <p> FUND STRATEGY: The ProShares UltraShort Russell 2000 Fund’s principal investment strategies include: investing in equity securities and/or financial instruments (including derivatives) that ProShare Advisors believes, in combination, in combination, should have similar daily price return characteristics as twice (200%) the inverse of the Russell 2000 Index; employing leveraged investment techniques and/or sampling techniques in seeking its investment objective; and investing assets not invested in equity securities or financial instruments, in debt securities and/or money market instruments. The Fund employs leveraged investment techniques to achieve its investment objective. Over time, the use of leverage, combined with the effect of compounding, will have a more significant impact on the Fund’s performance compared to the index underlying its benchmark than a fund that does not employ leverage. Therefore, the return of the index over a period of time greater than one day multiplied by a fund’s specified multiple or inverse multiple (e.g., 200% or -200%) will not generally equal a fund’s performance over that same period. <p> FUND MANAGEMENT: Principal Investment Strategy ProShare Advisors LLC serves as the investment advisor to the Fund.